Evolving IIoT and Digital Ecosystems for SMEs

Over the past few years, the IIoT market has evolved as many end users pushed past pilot projects and into major strategic initiatives, while vendors that initially sold point solutions are now providing more comprehensive offerings from digital ecosystems. Despite these successes, the risk of getting any IIoT or digital project wrong is still significant and can quickly cannibalize impact or ROI, consume valuable resources, and even deter future investments. While this is valid for companies of all sizes, small and medium-sized enterprises (SMEs) are typically more susceptible to this risk because they must "do more with less" due to their budget, workforce and resource limitations.??

However, the impact of IIoT and digital transformation projects for SMEs is substantial and is often viewed as a growth engine and driver of cost savings. According to 451 Research's Voice of the Enterprise survey data, 45% of SMEs (less than 1,000 employees) have deployed an IIoT project in a production environment expanding far beyond the piloting, planning or consideration stages. The impact of this IIoT success has been significant, as 53% of surveyed SMEs expect ROI of 25%–100%.??

Success factors for SMEs?

Much of the success for SMEs' projects stems from choosing to buy pre-integrated IIoT platforms, applications and services from software vendors instead of building them from scratch. SMEs are opting to purchase IIoT solutions with digital ecosystems to leverage production-ready software capable of quickly being implemented and driving value. Tapping into these external resources is especially important for SMEs that may have limited budgets for recruiting and retaining digital-native skills that are critical for developing and executing on a digital transformation project. These skill sets are in short supply, and for many companies already facing a growing skills gap, it can be difficult and costly to compete for talent with larger technology companies or enterprises with greater resources and reach.?

SMEs more often opt to buy IIoT??

Buying pre-configured digital solutions embedded in ecosystems?

Pre-configured digital solutions with a comprehensive partner ecosystem provide SMEs with quicker on-ramps to project success and alleviate hurdles they may face, including the time, resources, technologies and skills required to build from scratch. These digital solutions and ecosystems leverage years of software development, implementation of agile processes, integrations with a range of digital and physical systems, key technical and strategic partnerships, and more centralized security governance.??

Investing in IIoT and digital solutions with a comprehensive partnership ecosystem may seem like a significant investment, but will typically amount to a lower total cost of ownership over time due to the unforeseen costs encountered by companies opting to build. As mentioned, the ROI for SMEs that have implemented an IIoT project in a production environment is almost always positive and significant.??

Selecting vendors based on pre-defined criteria?

Many SMEs suffer from "analysis paralysis" by overthinking their choices among the many software vendors to pick from, leading to slow decision-making and sunk costs. Worse, some firms will choose a vendor that isn't well suited to their specific requirements, which can lead to stalled or failed projects. To lower this risk, SMEs should consider IIoT and digital solutions with strengths in the following areas.??

Solutions that are flexible with pre-configurations, integrations and modules that are interoperable can quickly and seamlessly connect to and manage the myriad IIoT devices and other value business systems an SME needs to tap into. "Openness" is also critical for connecting with countless digital and physical systems through a robust collection of API and connectors. The more "deployment-ready" a solution is, the quicker it can drive impact and negate concerns over stalled or failed digital projects.??

Cloud-based applications can provide quicker on-ramps for SMEs where they aren't troubled with managing the underlying infrastructure, instead developing "cloud-like" capabilities and benefitting from flexible as-a-service consumption models. A breadth and depth of strategic partnerships horizontally across the technology stack — as well as in relevant verticals, geographies and channels — can further help meet SMEs' more specific requirements.??

SMEs should also consider solutions with best-of-breed technical capabilities leveraging the latest innovations (e.g., AI/ML, cloud, cybersecurity) that are flexibly built to adhere to new technologies and that have a product roadmap to help meet their current and future needs. Lastly, there is value in solutions that can seamlessly scale a single digital use case to multiple sites, roll out multiple use cases in a single site, and/or expand to different functions and departments across organizations. SMEs should consider all these criteria and land on a solution that best fits their specific organizational needs.?

SMEs to leverage digital as a key value driver?

SMEs should make the proper investments in an ecosystem and should ultimately view digitization as an opportunity. With an evolved IIoT ecosystem providing greater functionality "out-of-the-box," the opportunity to leverage digital transformation initiatives to rapidly drive significant value has never been greater for SMEs. This often starts by purchasing pre-configured digital solutions embedded in ecosystems and based on pre-defined criteria.?

Author: David Immerman , Consulting Analyst at S&P Global